Growing number of Albertans lose pension plans: Report

The new report from the Alberta Superintendent of Pensions shows 37 pension plans were discontinued in the province for the year ending June 30, 2010, affecting 6,847 people.

For the same period in 2007-08, there were 30 private pension plans discontinued, affecting only 582 people.

Last year, slightly more than half of affected members had their pensions merged with another plan. In most of the other cases, members didn't lose their funds (which could be transferred to locked-in accounts), but companies stopped offering pensions for various reasons, according to the provincial government.

Dennis Gartner, superintendent of pensions and an assistant deputy minister for Alberta Finance, declined to comment on his new report.

Department spokesman Bart Johnson said the growing number of discontinued plans is a symptom of the economic downturn, and that private pension plans are solid vehicles worth pursuing.

"The private-sector solution is working," Johnson said.

"There are uncommon instances where you get companies that run into bankruptcy or (other situations). But, by and large, people in pension plans are well protected by the standards that we have in place."

In the 2009-10 period, thousands of people lost their Alberta employer pension plans for a number of reasons, including: bankruptcy, dissolved companies, financial or administrative considerations, a switch to group RRSPs, or "other" reasons.

For example, 1,321 members from four plans last year had their pensions discontinued because of companies dissolving, compared to none in 2007-08. Five plans were replaced by group RRSPs, affecting 316 people, compared to 132 people a few years ago.

Furthermore, 204 members last year had their plans discontinued for financial-administrative reasons, versus only three people in 2007-08.

Another 990 people (in 11 different plans) lost their pensions for reasons simply listed as "other."

"It's a trend that's showing up almost everywhere," said Norma Nielson, a business professor at the University of Calgary specializing in risk management. "The riskiness of the pension plans is going to follow the ups and downs of the economy."

Employer pension plans have disappeared because companies struggled during the downturn, Nielson said, while firms on more stable footing are moving away from pensions because of the high costs of offering them.

As the province's population has grown, so has the overall number of members in Alberta pension plans. The latest reporting period saw 234,290 pension plan members, up nine per cent in two years.

Provincial Finance Minister Ted Morton has been advocating for Canada to adopt a private-sector voluntary pension plan as governments look to bolster retirement savings for Canadians.

He strongly opposes the push by labour groups and other provinces for an enriched public Canada Pension Plan.

It is estimated six in 10 Canadian workers in the private sector have no private pension plan.

Morton, along with his federal and provincial counterparts, agreed in December to create a private-sector pension vehicle to boost retirement savings. The Pooled Registered Pension Plans (PRPP) are targeted at small and medium-sized businesses, and the self-employed who don't have a workplace pension option.

"The across-the-board CPP hike is kind of a shotgun approach," Morton said Wednesday, calling CPP a payroll tax that will stifle job creation. "We feel what is required is a targeted solution."

Morton said the pooled pension option will provide more stability compared to individual private plans because a large number of people will invest in it.

Liberal Leader David Swann strongly disagrees, saying a modest increase in CPP contributions would dramatically improve retirement income for Albertans.

"If we don't solve this now, it will just become a bigger problem in the future," Swann said. "It's a much more cost-effective approach for the majority of Albertans."

The new report also shows more Albertans are falling on hard times and needing to tap retirement savings.

The number of people facing "financial hardship" - and forced to apply to the superintendent to access emergency funds from locked-in accounts - has more than doubled from boom times to 2,433 in the latest period.

Also, the amount of money released nearly tripled to $24.7 million from 2007-08.

The largest number of applications for emergency dollars were due to low income (1,483 cases), according to the latest report, while 107 applications were for mortgage foreclosure and 77 for rental eviction.

"The trends are clear and they're ominous," said Gil McGowan, president of the Alberta Federation of Labour, which supports increasing CPP contributions.

McGowan said the latest numbers prove the provincial and federal governments' plans for a private-sector option is short-sighted because many Canadians are losing their pensions.

"If nothing is done to address these trends, then I think more and more Canadians - perhaps millions - will face poverty in retirement," he added